If your business has grown to the point where you are starting to consider taking on your first employee, this is fantastic news. Many new businesses do not reach this stage, so it is an achievement to be celebrated. Taking on an employee may enable you to take on more work and/or work more efficiently.
However, before you start advertising for your first employee, there are several points to consider. A good employee is worth their weight in gold, but the wrong person can cause more issues than they solve. Wanting to hire an employee is not the same as needing to or being ready to. Firstly, do you really need an employee?
Should you hire an employee?
If you are considering hiring someone because you are feeling pressured and you want an extra pair of hands, you should think twice before making a snap decision to take someone on. You need to work out precisely what work you need someone to do (e.g. administration), and how long you estimate the work will take. If they are unlikely to have enough work to fill a few hours a week, it may not be worth the hassle and expense of hiring someone. On the other hand, there may be lots of work for an employee on a seasonal basis, in which case, you might want to consider temporary staff or a contractor.
However, if you decide that you do have enough work for a part-time or full-time employee, you need ensure you are ready to hire someone.
Are you ready to hire an employee?
Will you be able to afford the cost of taking on an employee? Firstly, you need to be able to cover their wages, but there are also other costs to consider such as insurance and paid holiday time. Will the cost of the employee outweigh the benefits of hiring them?
You need to have a clearly defined role with specific responsibilities and tasks assigned to that person. It is also a good time to consider your company values and mission so you can incorporate this into your recruitment strategy.
Employee Identification Number (EIN) and Taxes
If you have decided that you need an employee and are ready to start the process, you need to take care of the legal aspects before you start advertising. Firstly, you need an Employer Identification Number (EIN) which the IRS uses to identify one business from another. This number will be required for all your documentation.
With your EIN, you need to ensure you are compliant with state and tax laws in terms of reporting wages paid and withholding taxes from employees and depositing them according to IRS regulations. You may also need to withhold taxes for Security and Medicare taxes from employees’ wages and match the contribution yourself. It is important to contact the IRS and/or a professional accountant if you are in any doubt about your tax obligations.
Legal requirements
In addition to taxes, there are several other legal requirements to comply with. For example, you will need to ensure that your employees are legally allowed to work in the US and you will have a deadline by which you need to report their employment to your state. In most states, you need to have workers’ compensation insurance to protect you and your employee financially should they need medical treatment and/or rehabilitation after an injury suffered during their work. You can get a workers compensation insurance quote online.
Depending on where you live in the US, you may be legally required to display informative posters for your employees and will have to follow laws on minimum wage, terminating employee contracts, etc.
Payroll
It is not enough to write a check or pay in cash if you want to ensure you are compliant with the law and that the system pays employees accurately and on time. A payroll provider will be able to automate payments, reduce your paperwork, comply with tax requirements, and keep track of sick days taken by employees. Click here for the best online payroll providers of 2020.
